At the current Wesfarmers Ltd (ASX: WES) share price, it could be one of the most solid ASX shares around. I’d be happy to own it.
The business has already been operating for decades. But I believe that it has a many more decades to go, at least, due to a couple of key factors:
Diversification and investment flexibility
Wesfarmers is a diversified business made up of several different segments like Bunnings, Kmart and Officeworks.
But it didn’t always own these businesses. Wesfarmers is not afraid to make major moves. For example, it divested its coal assets as well as Coles Group Ltd (ASX: COL).
I think that ability to invest into new sectors and divest unwanted ones helps its long-term existence and growth chances.
The newest moves are ones that are the most ‘modern’. For example, the Catch (e-commerce) acquisition and the lithium Mt Holland moves seem very smart in my opinion. It’s future-proofing the businesses.
Future buys and sells of businesses will increase the longevity of Wesfarmers.
Strong businesses
Not only can Wesfarmers change its holdings, but the current ones seems very high quality.
Brands like Bunnings, Officeworks and Kmart are all market-leading in their respective sectors. They earn good profit. Bunnings earns excellent profit for the capital that’s invested in the business.
Bunnings continues to grow stronger with its acquisitions of Adelaide Tools and Beaumont Tiles.
Kmart Group was improved by the Catch acquisition. Not only is Catch a great business, but it brings with it a lot e-commerce experience and abilities that can be applied to all of the online sales across the business.
Is the Wesfarmers share price good value?
According to CommSec, Wesfarmers shares are valued at at 26 times the estimated earnings for the 2023 financial year. If interest rates stay low, then it could be good value. But I’d be willing to wait for a better price considering how large Wesfarmers already is.
